BUS702 2017
Answer BOTH questions.
Each question carries equal weighting.
MAXIMUM TIME ALLOWED for writing answers:
TWO to THREE HOURS
Notes
(1) This is not a traditional exam but is a take home exam
If the prices of both goods and income increase by the same percentage, what will happen to the budget line?I
-:':,2- A. The budget line shifts outward without a change in slope.
j:- E. The budget lin
AmuneIhasWpamMIobespelmbookscfw_gcxB)andDVDscfw_good Q
B). 12
11
Mallietplica aleasiolows:
PB=$40a|1dPD=$40.
the cfw_be line drawing tool to plot is mailers budget constrain. Label llis he
'Budget'.
A utility function is given as
U=1|'MB
where B represents the quantity of books consumed and M represents
magazines. This utilityI is shown via indilTerenoe curves in the diagram to
the right.
If the
Both Sally and Sam receive a 10% raise in a single year. Sally increases her demand for ground beef whereas Sam decreases his demand for ground beef.
'iIFA. This is only possible if Sally considers gr
Assume that leisure is a normal good and that for a wage increase, the
substitution eect dominates the income eftect.
Use the line drawing fool' to draw an appropriate labor supply curve. Label this l
The marginal rate of transformation of yr fcrx represents
C:- . the siege of the budget constraint.
C:- B. the rate at which the consumer must give up 3r to get one more x.
(:2- C . px
p5,
-:"_*- D. A
A consumer has two goods in his consumption bundle: bread and coffee. The current price of bread is $1.00 per loaf and the price of coffee is $0.50 per cup.
What is the relative price of bread to coff
In tracing out a prichconsumption cunre cfw_FCC for good X, which of the following 1.I'an'ahles is held constant?
C:- A. Consumption of all other goods.
C:- B. The price of good X
C:- C. Consumer sati
A movement upward along an upward sloping Engel curve corresponds to
. a rotation in the budget constraint.
. crossing indifference curves.
. a parallel shift in the budget constraint.
. upward slop
Boyd has the following utility function:
U = 100346
where B represents hooks and C represents audio CDs
Boyd curreme consumes 8 units of good B and 4 units of good C.
His total level of utility is 1,6
In the diagram to the right, we have five different combinations of movies and
books. Combination A represents 2 movies and 3 books. Combination C
represents more books (7] and the same number of movi
FebPwt - Penn World Table - international comparisons of prod
Sunday, October 15, 2017
Selection criteria.
Variables
Regions
rgdpna
Real GDP at constant national prices (in mil. 2011US$)
CHN
China
rkn
ECOM30002/90002 Econometrics Semester 2
ASSIGNMENT 4
Instructions and information
Weight: 7.5%
Submit online through LMS no later than 2pm Wednesday 18 October (later than stated
in the Course Informa
A utility function is given as
u=m
where B represents quantity:I of haul-rs consumed and M represents
magazines. This utilityr is shown via indilTerenoe curves in the diagram to
the right.
The lev
Michelle spends all her money on food and clothing. 1u'lll'hen the price of clothing
decreases, she buys more clothing.
In the diagram to the right, the substitution effect is dened by the movement
fr
A consumer is choosing between magazines and books. His indilTerenoe
curves and budget constraint are shown on the graph to the right. '
lfthe price ofa book is $10, what is this
Under what conditions does the income effect reinforce the substitution effect?
The income effect will reinforce the substitution effect for a normal good.
Under what conditions does it have an offset
The indifference curves for left shoes and right shoes would most likely be
2' A. downward sloping and straight lines.
'1. .2' B. upward sloping and concave to the origin.
2' C. downward sloping and c
Given Ihe relaanal: between margiial income tax rates and tax revenue, if tax
rates 3642), apoicy to nulchmge tax rates waldbemiedtoi'icrease
total tax revenue.
Tax Revenue is. trillions
If Jose Marias utility function is
U|[B,Z=AB Z ,
what is his marginal utility of B?
Jose Maria's marginal utility of B cfw_HUB is
V
_ 1
MUB AB Z
What is his marginal rate of substitution between B and
If Freds marginal utility of pizza equals 10 and his marginal utilitv pf salad equals 2, than
C:- f-i. he will eat five times as much pizza as salad.
C:- B. he would give up 5 pizzas to get the next s
Concept Question 3.2 cfw_It
Assume that an individual only consumes two goods: bread and coffee. Bread is a normal good.
For a decrease in the price of bread, the income effect and substitution effec
Boyd has the following utility function:
U = mus-IE,
where B represents books and C represents audio CDs
Bundle A contains 1 unitls at good B and 49 units of good C.
Bundle E contains 5 units ot good
Suppose that the price of a good decreased.
The substitution etfect shows the change in consumption tor all goods in reaction to a change in relative prices holding utility constant
The income effect
0n the diagram to the light is plotted a single bundle of 4 books and 4.5 DVDs
consumed per month. This bundle is a point on the consumers budget constraint.
It the price 0! one book is $67.50 and one
Ev selecting a bundle where MRS = MRI the consumer is
C:- A. achieving a comer solution.
C:- B. not behaving in an optimal wav.
ilk-C. reaching the highest possible indifference curve she can aord.
C: